GRUPO GUAYACAN, Inc.
Building The Entrepreneurial & Private Equity Infrastructure

FUND OF FUNDS MANAGEMENT / Why Private Equity?

The principal benefits of investing in private equity include improving the risk and reward characteristics of an investment portfolio and its access to a wide universe of investment prospects that are entirely different from the investments available to most investors in the public market.

 Risk and Return Benefits - Investing in private equity offers the investor the opportunity to potentially achieve higher absolute rates of return while improving portfolio diversification.

As of December 31, 2003, the pooled average benchmark returns for all Private Equity investments have outperformed the S&P 500 returns by an average of 800 basis points for the five year time frame. For longer-term horizons, the pooled average returns for Private Equity have outperformed the S&P 500 by about 400 and 70 basis points for the ten and twenty-year horizons respectively*. The long-term returns of Private Equity clearly represent a premium to the performance of public equities.**

Private Equity’s low correlation to traditional asset classes is the driving element that helps improve portfolio diversification for the investor. This low correlation is achieved by Private Equity’s exposure to private and smaller companies as well as its access to different investment styles, industries and geographies.

*Source: Thomson Financial Venture Economics/NVCA, May 29, 2003.
**Source: European Venture Capital Association.
 
 Access to the Private Markets – According to Dun & Bradstreets’s Zap Database, as of May 2003, there were about 150,000 private companies with revenues of $10 million or more compared to about 5,500 registered public companies in the same revenue range. This wide universe of investment prospects represents a vast market of opportunities for Private Equity investors in a much more diverse environment than the traditional public markets. Access to these opportunities translates into potential higher returns for Private Equity investors.
   
It is for these reasons that over the long term, private equity has proven to be an important component of investment institutional portfolios.